Macron Law and franchising: much ado about (almost) nothing

Background
Final text

Background

The Macron Bill, which is related to growth and business and was expected to have a major impact on franchise networks, was adopted by the National Assembly earlier this year (for further details please see "New bill may thwart franchising in the retail sector"). At that time the assembly adopted a parliamentary amendment providing for, among other things, a maximum term of nine years for franchise agreements and the prohibition of post-contractual non-compete clauses.

The parliamentary process has now run its course and the bill became law on July 10 2015.

Final text

The final text steps back from the original bill in regard to distribution networks. One of the most debated points in the bill was the general limitation of the term applicable to agreements within a distribution network (whether under franchise or under the cooperative model) to nine years, irrespective of the market power of the franchisors or heads of distribution networks. The intense lobbying carried out by major cooperative retailers in France (particularly Leclerc) and certain franchise organisations (including the French Franchising Federation) has obviously been successful, since the nine-year limitation disappeared from the final text of the law. The government conceded that such limitation would have been both inadequate (as the amortisation of investments by franchisees and franchisors can sometimes take much longer than nine years) and useless, given that French and EU competition laws already set down certain limitations on the duration of vertical restraints.

As passed, the Macron Law has two main points:

• The franchise agreement and the related agreements "whose common purpose is the operation of one or several retail outlets and include clauses which are likely to limit the freedom of the outlet's operator to carry on its business" must all have the same expiration date. Therefore, if one of the agreements is terminated, all of the other agreements are terminated as of the same date. The parliamentary debates shed little light on what was meant by either 'related' or 'ancillary' agreements in this context. The general intention was to avoid franchisees being bound by multiple agreements relating to the operation of the sale outlets if the franchise has been terminated (eg, under supply agreements for goods or equipment with the franchisor or some of its affiliates). This principle does not apply to commercial leases which, under French law, are subject to a specific regime (a renewable term of nine years), irrespective of whether the lessor is the franchisor or a third party.
• Post-term non-compete clauses in franchise agreements are void. However, a non-compete covenant applicable after the expiration of a franchise agreement remains valid if:
  • it relates to goods or services which are the subject matter of the agreement;
  • it is limited to the premises where the franchisee conducted its business during the franchise agreement;
  • it is essential for the protection of substantial, secret and specific know-how belonging to the franchisor; and
  • its duration does not exceed one year from the expiry or termination of the agreement.

These conditions are almost identical to those set out in Article 5.3 of the EU Block Exemption Regulation on Vertical Agreements (330/2010/EC). Therefore, the Macron Law adds nothing new in this respect. However, it may limit the scope of previous court decisions which were keen to accept longer post-term non-compete clauses in franchise agreements if they were proportionate to the interests to be protected and deemed necessary for the integrity of the franchisor's network.

Franchisees' organisations, which had strongly backed the initial parliamentary amendments, are disappointed by the final version of the Macron Law.

For further information on this topic please contact Raphael Mellerio at Aramis Law Firm by telephone (+33 1 53 30 7700) or email (mellerio@aramis-law.com). The Aramis Law Firm website can be accessed at www.aramis-law.com.